Market Briefing For Tuesday, June 16
Business is booming - for certain sectors, and clearly has responded to those Government policies that have contributed to asset growth and stabilization for a fairly solid cross-section of Americans that work, did work, or normally work. It's of course the incentive policies for those areas with the most heartache that do require more efforts, and nobody wants to belittle that portion of society. It may even be why Congress wants to see precisely who got certain larger sums.
Executive summary:
- Economic revival is increasingly evident.
- Booming business may hit a brick-wall if people lose discipline about this, example: Fort Lauderdale has restaurants that reopened two weeks ago already closing (per a member there who loves dining out), repeat this in a few cities and it would affirm concerns regardless of Federal guidelines.
- The Univ. of Minn. infectious disease doctor refers to this as the 2nd Inning only, but we've heard him say that before (and he's pessimistic on vaccines or new effective upcoming therapeutic drugs).
- Our view is that President Trump should not be doing the Tulsa rally, as if it has poor outcomes, guess where the finger-pointing will aim (they would anyway, but why risk people actual health over a political crowded rally, of course this will be debated all Summer it seems).
- The virus has not mutated significantly, but it is targeting younger people, perhaps because most older folks are being comparatively careful.
- Drug progress is unfolding, but without particular news today.
- Closest news was FDA withdrawal of approval for Hydroxychloroquine 'emergency' use (primarily because of interactions, it remains available by physician prescriptions, should they wish..).
- Beijing is in a 'wartime' mode to quash a virus outbreak resurgence, and early Tuesday Beijing started barring 'risky' people from leaving the city.
- China blames this outbreak on 'imported Salmon' (stop eating sushi).
- Dr. Gottlieb believes the virus was not transmitted by fish, but by handling.
- Speaking of China, their officials will be meeting with this week, do discuss a 'range of issues' with Sec'y. of State Pompeo, at Hickam AFB, Hawaii.
- Estimates now are 150,000 +/- new Covid infections daily in the USA, no wonder other countries are continuing to ban travelers 'from' the US, and estimates of over 200,000 deaths by Fall.
- Univ. of Minn. believes it will take 60% or so of all citizens infected to get to a point of 'herd immunity', a trend likely heading that way with undisciplined behavior, however many are betting on a drug before Fall (better be).
- JP Morgan and others are starting to bring staff back to physical offices.
- And as I've suggested, just wear masks (and/or face shields) religiously.
- Stock market behavior continues as projected, which was for a decline early Monday followed by a solid bounce.
- Though we got that and it faded late, there is reasonable confidence for a bit more upside regardless of jockeying-around early Tuesday.
- The Fed's 'statement' about limited corporate bond buying amplified their intention previously announced, hence it wasn't the 'surprise' some say.
- Fed existing stances on bonds is why I said this was more of the movement toward NIRP (Negative Interest Rate Policies), which is a negative.
- While 10-year Treasury moving over 1.0 would be concerning to markets, keep an eye the other direction, as too low will hint at more NIRP and there are reasons the market might not be pleased with that.
- For now there is no change in overall perspectives for intraweek rallies as for a number of reasons efforts to contain declines prevail.
- Hence we believe 'The Inger Bottom' as I labeled the March 23rd low that day, will 'hold', and the contested 200 DMA at least for now.
- The 2020 Election becomes more of a focus for obvious reasons, although the tax issue will have to be contemplated almost regardless.
- Tuesday we continue to expect some outline of remedial / reform proposals regarding public safety (policing) from the President, and believe he should, if he has any regard for unity, be a bit more favorable towards reforming the so-called 'police culture', and remain respectful of the Supreme Court LGBT workers (landmark) ruling that Civil Rights laws are applicable.
- This matters, because 'if' the market prefers his reelection, he needs to broaden his base (the last two weeks haven't helped so far, even though most people are aware how legitimate protests morphed into danger).
- So far the President has not mixed carrot & stick, but mostly talked stick and done little, he could unify while also 'liberating' the occupied part of Seattle.
- It's necessary to promote unity while not caving-into the mob, or naive embrace of extreme left views that go way beyond egalitarianism.
- S&P behavior enhances odds of a trading-range pattern of ever-oscillating shuffles, as Summer evolves, stay tuned as this will be better defined.
Meanwhile.. yesterday, in traditional Peter Lynch (Fidelity) fashion, I took a few minutes to chat with two managers of consumer stores, a national clothing store chain and large big-box retailer. In both cases they said business is very strong, lots of people in the Mall for the clothing store, and online demand strong for the big-box, which just opens today for no-appointment visits by customers.
(I'm not particularly focusing on both of those public companies, a reason I didn't mention them... but they were Hollister-Abercrombie & Fitch (ANF) and BestBuy (BBY).) I also noticed business exceeds inventory at Bed, Bath & Beyond (BBBY) and my gym is getting crowded, but short hours and wet areas closed isn't very useful. Also today 24 Hour Fitness filed Chapter 11, and while they will keep about half their locations opened during restructuring, they likely lost lots of members already, given an approach of 'workout by appointment, 1 hour and then you're out'. So if they want to retain memberships, 24 Hour needs to be more like LA, and LA of course needs to expand hours, which will make it less crowded. Understandably everyone is trying to figure-it-out as they go, keep employees working and not offend customers so much that they don't return. My breakfast places? Only the one time last week, now they are backed-up incredibly because of distancing, and in my opinion they can't make it unless able to have full seating soon (or a bigger bailout from Washington ..).
All these signs of a desire to get out, beyond heightened concern about surging COVID-19 (but with hospital admissions 'for' COVID-19 not increasing quite as fast as media makes it sound, except for hot-spot cities). Note that the media reporting hospitals 'near-capacity' makes no reference to percentage of capacity used by routine procedures or surgeries, rather than COVID-19 admissions. It's increasingly hard to get accurate data in some states, which may be trying to obscure the data, it seems.
I say 'trying' because in some cases like Florida data breakdowns seem to have been purposely changed to make COVID-19 admissions less clear, and I suspect that's to not dissuade tourism from returning later this Summer (maybe immoral but that's the case, for-instance Tampa is in a more serious situation for now). I am pleased to see business perk-up despite the social disruptions, which seems to be more annoying (regardless of anyone's political views) than destructive to reopening, on a national scale, but absolutely troubling in many ways.
Will this trend also result in physical collaboration increasing? Perhaps yes, but less so in cities more-impacted by metro areas where it seems there's a wake-up to what can be done better, but also a concern about those desiring not so much to resolve issues, but to perpetuate division and even impact the economy because they desire to make everyone conform to their 'single' view. This isn't a debate about media agendas, although those are so obvious it would almost be theatrical if the topics weren't so serious.
(Typo noticed: I obviously meant 'nursing home' not nursery.)
In-sum: business is improving, some areas like restaurants are hard-pressed to keep up with demand, because of compelled social-distancing-based seating. I would presume the jump reported by major Las Vegas hotel/casino operators is similar, pent-up demand, and inability to really offer the other amenities most of the visitors desire, including limitations on pools, spas, and of course clubbing. I am aware of a couple that simply won't open because of requiring being seated for a drink, with no mingling or dancing allowed, as makes no sense for them.
What makes sense for the market is to have this move extend a bit (even if we get a brief pullback in the morning), which should then see follow-through on the upside, even if this is just the expected rebound before renewed selling later on in the week.